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Yves here. Readers should take note of the larger significance of this story. Even though the US has become a more and more destructive hegemon in the post 9/11 era (and we weren’t all that considerate before) and Trump is widely credited with reducing America’s standing even further…China is so heavy handed and belligerent that it is managing to make the US look like the less ugly ally. And remember, this is despite the US having deposed an Australian prime minister, Gough Whitlam.

By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Cross posted from MacroBusiness

he natural tensions between the Australian democracy and Chinese autocracy are back today. Via The Australian:

China’s ambassador to Australia has warned that the relationship between the two countries has been marred by “systematic, irresponsible and negative remarks” about China, and trading ties could be damaged if the situation is not repaired.

In a frank interview with The Australian at the Chinese embassy in Canberra, Cheng Jingye said Australia needed to do more to “increase mutual trust” in its ties with China.

“If there is a growing lack of mutual trust, in the long run it may have some undesirable impact (on trade relations with China),” Mr Cheng said.

While the ambassador did not single out any area of trade that could be affected, he said there were already concerns that some Chinese students in Australia had been subjected to “irresponsible and malicious allegations” and “security and safety incidents”.

Mr Cheng rejected suggestions that China was interfering in the political processes in Australia and said last year’s campaign against former Labor senator Sam Dastayari over his dealings with Chinese businesspeople in Australia had been “unfortunately manipulated as a pretext to smear China’s image”.

Mr Cheng said Australians needed to decide whether they saw China as an opportunity or a threat. ‘Some Australians, a minority, always see China through coloured lenses — totally dark glasses,” he said. “If you have a deep-rooted prejudice against somebody or some thing, you may find everything in a twisted manner and you cannot come to a rational judgment.”

What should we do, Mr Ambassador. Round up the dissidents for re-education?

We don’t need to choose sides on China. We should simply see it for what it is: both an opportunity and a threat. As should everybody else. Via Reuters:

Beijing’s international trade representatives have held multiple meetings with their counterparts in leading European economies as China seeks support in its trade brawl with the US, according to Reuters.

US President Donald Trump is threatening $150 billion in tariffs on Chinese imports. Beijing officials met ambassadors from France, Germany, the United Kingdom, Spain and Italy last Thursday and Friday to propose a firewall against Trump’s protectionism, the news agency reports, citing various sources.

“The message was that we have to stand together against US protectionism in favor of free trade,” a European diplomat told Reuters. “China is showing confidence, but internally they appear quite concerned. They have apparently underestimated Trump’s resolve on trade,” the diplomat said, adding that Beijing is nervous that many of China’s trading partners could side with the US.

Europe should back Trump. China is cheating and in doing so giving rise to such things as…well…Donald Trump.

Australia’s own path of Chinese hedging should entail a four point response.

First, our economy must seek balance. To achieve that we will need a raft of new policies that aim to improve Australian competitiveness and get us out from under the commodity dependence. This is necessary anyway as China slows and changes and wants less dirt. We must reform energy, banking, and real estate to lower the currency, boost productivity and move from urbanisation growth drivers to tradables.

Second, we must engage strategically and diplomatically across our entire region. ASEAN is a natural partner to hedge Chinese influence. The Quadrilateral is also useful in bringing together allies. The US alliance must be constantly tended and revitalised. The Pacific must be treated as the good friend and partner that it is with significant aid and bilateral economic exchange, not the usual afterthought.

Third, Australian politics and society must be prepared and shielded to contain excessive Chinese Communist Party influence. This can easily be achieved via bans on foreign (or all) donations to political parties and the introduction of a federal ICAC. Society, too, is easy enough to protect if we have the will. There is no need, nor desire, for discrimination. We simply cut the permanent migration intake in half. It needs to be done anyway to take pressure off the east coast crush-loading. We should eschew both the cultural chauvinists of the Coalition and the “Asianising” influences within Labor. We are a multicultural democracy with liberal Anglophone roots. Let’s accept and protect it.

Just like everywhere else in the west they have their people believing it is. They discriminate against the Aborigines, Chinese, South Asians as well as others fleeing repressive regimes created and supported by the neo-liberals.

Not so simple. About a third of Australians these days were born overseas which is a very high rate and that is not counting those born here of parents that came from overseas. Nonetheless, Australia is a lot like any other western country such as the UK, the US, etc. in that as far as democracy and its people are concerned, it is an iron fist in a velvet glove. Make of that what you will.

Yep, my father was born overseas … in Epsom, England. Quite a few of us like that. Quite a few with NZ parents, too. Not so many from Canada, though.

However, I have seen it stated that more Americans have migrated to Australia (and are now permanent residents and/or citizens) than Australians have migrated to America (and apparently Australia is the only country of which ‘more Americans here than us in the USA’ is true).

The ambassador may be justified but the question about responsibility and rounding people up is not entirely off base. Having dealt with this kind of point from people from the PRC the statement has other factors.

First hyping the harsh treatment of Chinese people abroad is one of the tools in the PRCs nationalist propaganda war. This takes the form of hyping news stories about any bad thing that happens to a citizen to including what I call the “innocent Chinese girl goes to America, turns into psychopath” meme in TV shows. In essence they are hyping it to stoke divisions or at least lazily pushing loyalty to the party as protector. Thus the ambassador may be trying to raise the claim more for PRC consumption than for Austrailian communication.

Second. for people who are used to true state media and a passive politics are often genuinely confused by free media and free politics. In Chinese media nothing is reported or worse still published that is not well inside the reservation. And no bill is entertained in the great hall of the people that has not been pre-approved at the highest level.

As a consequence people from the PRC, even some I know who have been abroad for years still instinctively assume that if a random official says something or an editorial makes odd claims that it actually represents the will of the President and that it is his job to stop it. Ditto for any actual public event. Once you are used to the idea of their “stable” politics (their term) then our more “chaotic” version is just hard to work with, and a statement like “the government needs to do more to increase trust” sounds entirely sensible because they assume that all mistrust flows from the government itself.

“As a consequence people from the PRC, even some I know who have been abroad for years still instinctively assume that if a random official says something or an editorial makes odd claims that it actually represents the will of the President and that it is his job to stop it.”

Did you mean to type “the DNC” or “HRC” there? Because the sentence would explain a lot about them, too.

The mention of “Chinese students in Australia had been subjected to “irresponsible and malicious allegations” and “security and safety incidents”.” reminded me of an anecdote of a friend in college.

Around 2005, my best friend was chosen to be part of an educational round table taking place at our college’s business school (one of some note), with invited students from China. The purported purpose of the round table was to share the American college experience with Chinese students. My best guess is that this was a sort of sales pitch to have students enroll from abroad.

However, a peculiar thing happened during the round table. As part of the conversation, some of the American students asked about the Chinese school experience and how their system worked. Uniformly the Chinese students replied that it was a state secret and they couldn’t talk about it.

I was flabbergasted as my friend recounted the tale. The whole point of a round table is to exchange ideas, and essentially these students were failing to live up to their end of the bargain. Looking back at it, though, they were probably under direction to respond that way. Even so, at the time it sounded like some sort of incompetent spy thriller nonsense.

Therefore I read the excerpt above and have nothing but the deepest suspicion about “irresponsible and malicious allegations” being so irresponsible and malicious in actuality.

Before they leave China all students who sign up for foreign courses have to do a special ‘course’ on ‘how to represent China abroad’. Its made clear to them that they’ll be monitored to ensure they are doing their patriotic duty.

You might think the smarter ones view that with cynicism, but a good Chinese friend of mine, not a person to take instructions from anyone, told me that she was a good five years living in the West before it occurred to her how odd that course was and how many misconceptions she’d been fed by it (and her general Chinese education).

“she was a good five years living in the West before it occurred to her how odd that course was and how many misconceptions she’d been fed by it”

Oh, yes. I’ve heard the same thing. And I’ve visited friends kids while traveling in China who where doing their year of study abroad in Shanghai. These US kids where staying with the Chinese kids going through that stuff so they could do their study aboard in the US the following year.

That gels with my experience as well. Even the cynical ones have still been exposed to the party memes so long that deep ones like “all media is state media” are hard to shake. And Chinese students represent a point of particular concern for the government as they are both a resource but also a flight risk. In recent years the “stay at home” message has become stronger as they try to focus on loyalty over advancement.

Public intellectual, ethics professor and environmental activist, Clive Hamilton just published a book about the mainland China assault on Australian politics. They are the major fund providers of both political parties.

He published the book “Defiant Earth” in 2017

Humans have become so powerful that we have disrupted the functioning of the Earth System as a whole, bringing on a new geological epoch – the Anthropocene – one in which the serene and clement conditions that allowed civilisation to flourish are disappearing and we quail before ‘the wakened giant’.

This year he published “Silent Invasion: The Influence of China in Australia.” The major publisher in AU who had previously published 8 of his books backed out at the last minute over legal threats from CCP. Oxford University press bowed down to CCP but later recanted.

Here is an article he published a few days ago which is reposted on his web page

Clive Hamilton wrote a book bashing the Chinese. He didnt write a book about foreign influence in Australia that included looking at China, which would have been useful. He wrote a book specifically about Chinese influence, presenting it in terms of an invasion. Australians have long had a deep prejudice against the Chinese and especially the Chinese who came to Australia in the middle of the 19th century. And being overrun by Chinese is at the core of this psychological antipathy. This resulted in all sorts of laws restricting them and their attempts to settle in Australia. Clive Hamilton is tapping into and exploiting a xenophobic tradition in Australia regarding the Chinese. I think it highly irresponsible of him.

Put the shoe on the other foot. Whether deserved or not, China has had a long standing antipathy to ‘Western’ influence. Their system truly is authoritarian and xenophobic. Australian resorts to similar methodologies , though storied, are rational. Nothing less than the primacy of either Western “liberal” traditions or Eastern “authoritarian” traditions is at stake. We may not get to “the promised land,” but at least we’re pointing ourselves in that direction.
This example is a real world expression of the “clash of cultures” concept.
A cynic might say that it’s a “clash of elites,” world wide version. In that case, I’ll choose the locals over the ‘furriners.’

Thanks for that link. I found the article to be incisive and insightful, not xenophobic. The simple fact is that the PRC and CCP are indeed pushing their own ideological views and are occasionally being hamfisted about it. This does represent a threat to Australia due to proximity, relative size and trade issues. I found his assessment to be anything but racist or xenophobic, but rather a well supported assessment of the unfolding geopolitical situation in the South Pacific.

I know basically nothing about China-Australia relations, but the text of the article itself doesn’t seem to bear out the assertions being made. So the China ambassador complains about scaremongering about China. Then China has the temerity to try to shore up some allies in Europe for its trade war with the United States. This is somehow “heavy-handed and belligerent?” I mean I know nothing about the Sam Dastayari thing, and banning foreign donations to political parties is probably a perfectly fine idea in general, but…

Furthermore the author of the article asserts that a) Trump is China’s fault because of “cheating,” and b) “Australian politics and society must be prepared and shielded to contain excessive Chinese Communist Party influence.” Which honestly is the exact kind of ideological rhetoric that makes me think the Chinese ambassador isn’t too far off the mark in his complaints.

Perhaps going waaay on a limb here, I would say China does have a history of a few thousand years of being arrogant, xenophobic, heavy handed with a tendency to invade all their neighbors. Yes, one shouldn’t take the past for the future, but the Chinese government has almost never taken a soft touch with anyone. They are the center and everyone else should do as they say. I would say it is an unconscious, unthinking, reflexive attitude of that culture. Much like the West to the rest of the world in the past, except the various power centers, nations, states, institutions, and cultures in the West, of the West, have broaden the West as a whole a little more.

Look up the history of the Opium Wars which began China’s century of humiliation in the 1850s. British warships with superior military technology forced China to accept Opium instead of silver to pay for their exports. China was also forced to set up Western enclaves in it’s trading ports. As for invasions, the most recent was from Japan in the 1930s. You could read up about the rape of Nanjing for example. For the Chinese 2000- year civilisation, these are recent history.

All true. I will respond with the often multiple sometimes centuries long conquests of Vietnam, Korea, Tibet, the Uyghurs, Taiwan (especially the near genocide of native ethnic Taiwanese, although the Japanese and the Nationalists did more of the killings and suppression.) I can also mention the creative use of artificial islands to claim much(most?) of the territorial waters between Vietnam, Indonesia, Taiwan, the Philippines, and China. Claims it only made this century, I think, and recognized by no one else. It does have the most powerful regional navy, which allows it to use its own type of gunboat diplomacy, and gain control over some of the most important sea-lanes on Earth.

What was done to the Chinese was not only unjust, it was evil. However, claiming victimhood to excuse or justify its own unjust and often evil actions is hypocrisy at best, maybe even insulting to everyone including the very people butchered by the Western powers and the Japanese.

Suggest four titles that should form the basis of anyone (Western) hoping to understand China:

1. Autumn in the Heavenly Kingdom (Taiping Rebellion, +/- 20M dead)

2. Generalissimo (Chiang Kai-Shek era, prob. >30M dead)

3. The Cultural Revolution: A People’s History (prob. >30M dead including the Great Leap Forward. I have never encountered a book where I had to stop reading because the stories were so unbelievably heart-wrenching)

4. Street of Eternal Happiness (modern-day exposition of today’s situation through the stories of all the people down one street in Shanghai, extensive discussion of the land confiscations of +/- 50M people)

As far as “Chinese influence” in my adopted land of Australia, nothing would approach anything like the MI5/U.S. C.I.A. coup here in 1975:

The U.S. Central Intelligence Agency’s (CIA) Tibetan program was a covert operation during the Cold War consisting of “political action, propaganda, paramilitary and intelligence operations” based on U.S. Government arrangements made with brothers of the Dalai Lama, who himself was not initially aware of them. The goal of the program was to destabilize China as part of a greater campaign against communist regimes.[1]

We might also ask, what books would the Chinese read to know about America? We want to know China, and we want to know what China knows about the United States.

Additionally, today’s China is a mixture of Marx-Leninism, traditional Confucianism/Taioism, and Capitalism. So, any books on Chinese history, myths, culture, arts (the feudal four arts of a scholar gentleman – calligraphy, painting, qin music and the game of Weiqi.), etc. are helpful.

Calling the 1975 events in democratic Australia a “coup” simply does not square with the facts.

Whitlam had paralyzed the government. Kerr, rightly or wrongly, but constitutionally, dissolved the government and called new elections.

In a free, open, and loudly contested election Whitlam’s party lost badly. Polls at the time showed that Australian voters were far more unhappy with the recession, gridlock in Canberra, and Whitlam than they were with Kerr’s action. Whitlam’s party ran on the platform of “Shame, Fraser, Shame.” The Australian voters spoke. Fraser won 91 out of 127 seats.

There is no doubt that there was dancing in the halls of the CIA and MI6 when Whitlam lost the election. It is likely that both agencies spent some money trying to influence the election outcome. As an American, I find that shameful. The size of the anti-Whitlam landslide, however, shows that the outcome was all Australian. The CIA and MI6 could have sat on there hands and Whitlam would have lost.

You could just as easily argue that Trump paralyzed government, or that the Carter’s supposed mishandling of Iran hostage crisis paralyzed the government. But they weren’t turfed out of office prematurely due to foreign interference.

The idea that a governor general, a colonial hold-over, can dissolve the government is not democratically legitimate, and there is a a fair bit of evidence that US pressure had a great deal to do with that ouster. You don’t know what would have happened had Whitlam served out his term. A mere month can be a very long time in politics.

Whitlam demanded to know if and why the CIA was running a spy base at Pine Gap near Alice Springs, a giant vacuum cleaner which, as Edward Snowden revealed recently, allows the US to spy on everyone. “Try to screw us or bounce us,” the prime minister warned the US ambassador, “[and Pine Gap] will become a matter of contention”.

Victor Marchetti, the CIA officer who had helped set up Pine Gap, later told me, “This threat to close Pine Gap caused apoplexy in the White House … a kind of Chile [coup] was set in motion.”

Pine Gap’s top-secret messages were decoded by a CIA contractor, TRW. One of the decoders was Christopher Boyce, a young man troubled by the “deception and betrayal of an ally”. Boyce revealed that the CIA had infiltrated the Australian political and trade union elite and referred to the governor-general of Australia, Sir John Kerr, as “our man Kerr”.

Kerr was not only the Queen’s man, he had longstanding ties to Anglo-American intelligence. He was an enthusiastic member of the Australian Association for Cultural Freedom, described by Jonathan Kwitny of the Wall Street Journal in his book, The Crimes of Patriots, as “an elite, invitation-only group … exposed in Congress as being founded, funded and generally run by the CIA”. The CIA “paid for Kerr’s travel, built his prestige … Kerr continued to go to the CIA for money”.

When Whitlam was re-elected for a second term, in 1974, the White House sent Marshall Green to Canberra as ambassador. Green was an imperious, sinister figure who worked in the shadows of America’s “deep state”. Known as “the coupmaster”, he had played a central role in the 1965 coup against President Sukarno in Indonesia – which cost up to a million lives. One of his first speeches in Australia, to the Australian Institute of Directors, was described by an alarmed member of the audience as “an incitement to the country’s business leaders to rise against the government”.

News Corporation chief Rupert Murdoch directed his editors to “kill Whitlam” some 10 months before the downfall of Gough Whitlam’s Labor government, according to a newly released United States diplomatic report.

The US National Archives has just declassified a secret diplomatic telegram dated January 20, 1975 that sheds new light on Murdoch’s involvement in the tumultuous events of Australia’s 1975 constitutional crisis.

Entitled “Australian publisher privately turns on Prime Minister,” the telegram from US Consul-General in Melbourne, Robert Brand, reported to the State Department that “Rupert Murdoch has issued [a] confidential instruction to editors of newspapers he controls to ‘Kill Whitlam’ “.

Ironic that the humiliation came just a few decades after China (admittedly Manchus who ruled by then, and they were still trying to pass themselves off as ‘Chinese’) more than humiliated the Dzungars.

From Wikipedia, Ten Great Campaigns:

Of the ten campaigns, the final destruction of the Dzungars (or Zunghars)[1] was the most significant. The 1755 Pacification of Dzungaria and the later suppression of the Revolt of the Altishahr Khojas secured the northern and western boundaries of Xinjiang, eliminated rivalry for control over the Dalai Lama in Tibet, and thereby eliminated any rival influence in Mongolia. It also led to the pacification of the Islamicised, Turkic-speaking southern half of Xinjiang immediately thereafter.[2]

Here are the ten campaigns:

1 Three campaigns against the Dzungars and the pacification of Xinjiang (1755–59)
2 Suppression of the Jinchuan hill peoples (1747–49, 1771–76)
3 Campaigns in Burma (1765–69)
4 Taiwan rebellion (1786–88)
5 Two campaigns against the Gurkhas (1788–93)
6 Campaign in Đại Việt (1788–89)

One notes the various countries that were objects of emperor Qianlong’s humiliation desire.

A few thousand years … of invading their neighbors ? … when and what neighbors were they invading? If one were to make a blanket statement about Chinese history, it would probably be the opposite: they keep to themselves and don’t let others in.

Ban Chao (Chinese: 班超; Wade–Giles: Pan Ch’ao; 32–102 CE), courtesy name Zhongsheng, was a Chinese military general, explorer and diplomat of the Eastern Han Dynasty. He was born in Fufeng, now Xianyang, Shaanxi. Three of his family members — father Ban Biao, elder brother Ban Gu, younger sister Ban Zhao — were well known historians who wrote the historical text Book of Han, which recorded the history of the Western Han Dynasty. As a Han general and cavalry commander, Ban Chao was in charge of administrating the “Western Regions” (Central Asia) while he was in service. He also led Han forces for over 30 years in the war against the Xiongnu and secured Han control over the Tarim Basin region. He was awarded the title “Protector General of the Western Regions” by the Han government for his efforts in protecting and governing the regions.

…

The kingdoms of Khotan and Kashgar came under Chinese rule by A.D. 74. “Pan Ch’ao crushed fresh rebellions in Kashgar (80,87) and Yarkand (88), and made the Wusun of the Ili his allies.”.[1]hh

I will agree that China has alternated between expansion, and isolation, but every single nation on its border has been subject to invasion, even conquest; on this very thread MyLessThanPrimeBeef listed the Ten Great Campaigns of the Eighteenth Century, and I can point to the military invasion, conquest, and severe repression of Tibet, not to mention the outright annexation, or transfer, of a large chunk of Tibetan territory to China.

The only reason I can see that China stopped beating, including genocide along with outright war with their neighbors for one hundred and fifty years is because all the Western powers plus Japan was being evil to the Chinese. Japan was particularly vile. Mass rape, murder, human experimentation, and biological warfare. What Japan did just about, but not quite, the Nazis only because actual genocide was planned, and it did surpass the Chinese.

Since this is supposed to be an economics website, I will mention that pretty much all the nastiness for at least 200 years was mainly economic theft using war as the means. All that death for money which is nauseating.

China didn’t always keep to itself. The country we now call China used to be a series of kingdoms with cultures and languages as diverse as all of Europe.

China proper was a large kingdom in the northeast around where most of the Great Wall is today. It expanded outwards about five hundred years ago in an extreamly bloody campaign that saw the absorption of extermination of their less Han neighbors.

A lot of these invasions involved a lot of Nanking style rape incidents against ethnically dissimular southern and central Chinese people’s.

Like Japan banning the Korean language in Japan ruled Korea, the Chinese exterminated their subjects in the south and east linguistically as well.

haha when I read that headline I expected to find China telling Austrialia that a top-down system is necessary for Groaf, and that messy democracy stuff (hiring quotas! local zoning! oh my!) just gets in the way.

I mean, that’s why America basically has done away with it, as the Owners have finally noticed that our sad sack Constitution was written to suppress democracy in every way possible.

Not quite suppress. The Founders intentions were to moderate, and channel, the passions of the mob with the educated probably wealthy, or at least well off, upper classes being mostly in control; the will, opinions, beliefs, and welfare were to taken into account and probably followed with prudent, thoughtful actions.

Their desired functioning of the Republic was elitist as Hades; however, they were terrified not only of mob rule, but also despotic, or strongman, rule as well as by a corrupt, selfserving, uncaring, even despotic oligarchy both being just as dangerous as the mob. The Constitution is setup to be a balance of power with some power more equal than others.

We now have a corrupt, self serving, and uncaring national oligarchy with a number of state level ones. I am just waiting to see how fast it becomes despotic. We’re not there. Yet.

I’m not sure of the context and the exact point of this post. I do know that the Chinese have a suspicion of the West with their history of experiencing colonialism and imperialism at the hands of Western (and Japanese) powers. They even go so far to call it the century of humiliation.

There’s also that they are suspicious of the constant Western subterfuge of their Communist society. I would say that their communism is more of a nationalist state capitalism where party and state officials are in bed with their own business dealings, but they’ll promote national interests as opposed to foreign interests that try to crack into their economy. It’s an interesting story seeing how communism reverted into nationalist capitalism but that’s a tangent.

Anyways, I see a similar story to Russia where a rival to Western powers is acting out for its own interests in the face of those Western powers that were acting out agaijst it for their interests in the first place.

Arguaby, China is the most imperial of cultures, an attitude ingrained by almost 3000 years of geography and history. For comparison, US arrogance was facilitated by relative isolation, the effect of 2 oceans between us and the turmoil of the Old World. However, that has only been true for a bit more than 200 years, and the US has been powerful for far less time than that. Nor have we forgotten being a colony.

Take a look at the map of Asia: China’s isolation is a bit less obvious than N. America’s, but it’s been assured by mountains, deserts, and the Pacific Ocean. India, the rival Asian civilization, is separated by the Tibetan Plateau. There was contact, but no political exchange. The only rivals are Viet Nam, Korea, and Japan, all much smaller and culturally dependent. With rare, brief exceptions, China’s been the Big Dog for millennia. And throughout the time, it’s had an imperial, highly authoritarian form of government. Now that it’s recovering from its brief period of being a colony of the West, it’s making up for lost time.

That doesn’t necessarily mean they’re villains; it does mean that their neighbors need to be extremely vigilant. History weighs heavy.

China is cheating and in doing so giving rise to such things as…well…Donald Trump.

I can’t speak to trade between China and Australia.

But after the most recent Michael Hudson posting on NC, I’m not sure anymore that China is cheating with respect to the US. They certainly were cheating when the peg was being maintained by their central bank printing yuan. After the PBoC got out of that biz, I assumed the peg was being maintained through other artificial demand in China for US assets. But reading the Prof. Hudson transcript, the impression I’m left with is that it’s US corporations in China that are maintaining the peg, in particular US corporations in China that need to repatriate their profits from China to the US.

General Motors Co. sells more cars in China than at home. There are more Apple Inc. iPhones used in the Middle Kingdom than in the U.S. Overall, China subsidiaries of U.S. companies sold $223 billion of stuff in 2015, reckons Deutsche Bank AG.

Now the trade deficit between US and China was $367B in 2015. So in theory $223B of that could have been due to US corporations repatriating profit back to the US. Now that said, that $223B is not profit (earnings), it’s revenue. So assume 50% profit margin on that? I bet in China profit margins are a lot higher if the deficit spending and private debt creation is the way we hear it is.

Anyways, at best 2/3rds of the deficit can be explained by US corporations in China repatriating profits back to the US. Which still leaves at least 1/3rd that needs to be explained. And there could be some perfectly reasonable explanation for that as well. If we could get a full picture of what’s happening in money flows between US and China, that would help tremendously. Policy should flow from that.

Most of China trade barriers are non-tarrif, they are CCP cultural based, so hard to point at a paperwork trail for any WTO dispute. CCP exerts tremendous influence even on private firm, even more so on listed companies, even if they are not SOE.

Capitalist free marketers who have not been intimately engaged in China with local companies, even joint venture stock companies, can’t understand how these invisible barriers function.

If the trade is in balance and America has a huge balance of payments surplus from all the debt service that countries owe in dollars – plus a huge remission of profits by American companies that have bought out foreign industry – then the dollar’s exchange rate would soar.

Most of China trade barriers are non-tarrif, they are CCP cultural based

If anything, barriers in China for importing goods from the US should be reducing demand for the US dollar in China. But it’s not. There’s strong demand in China for the US dollar. Question is, what’s propping that up? Per Michael Hudson and the Bloomberg article, part of what’s propping that up is US corporations with a presence in China needing to repatriate their profits to the US.

Vice versa, the yuan being so cheap compared to the dollar makes it attractive for US corporations to outsource their supply chains to China. I don’t think there’s much more to it than that when it comes to US corporations making a decision to outsource their supply chains (and therefore our jobs) to China.

China is depressing RMB to reduce temporarilly, outflow of capital, as reduces appetite to take hit on exchange rate to profits, which can be *estimated* instead on spreadsheet as not realized.

2. Demand for dollars does not equate with demand for US goods. A lot of it has to do with servicing private debt, gotten on low USD interest, based on assumption that peg will not move much. Bad assumption for many property firms.

*this does not include $10.1T in outstanding domestic debt which is only shown going out to Q2 17.

The growth rate from quarter to quarter is actually exceeding their rate of retiring debt. I’m going to assume that once the US$ are acquired for the bond issuance, that the entity acquiring the currency is going to immediately convert it to local currency to do business internally in China (e.g. pay workers, what not). So “following the money”, I guess the way I think about this is the initial loan amount in US$ is wire-transferred into an account in China, but then that’s exchanged immediately by the debtor for yuan. Which creates a demand to convert from dollar to yuan, hence making the yuan stronger. And then as the debt as paid back, this flips around and creates a demand for dollar, hence making the dollar stronger. But as I mentioned, the growth rate at this point in time is in new issuance rather than retiring of debt, so in theory, this should actually net out as making the dollar cheaper compared to the yuan.

That said, I can imagine that this also plays out differently. That the US dollar is wire-transferred into an account in China, but then the debtor doesn’t convert the dollar to yuan. This could be true for entities which do their business entirely in dollars. I think this might apply to the 2nd column above – the National debtors – notice that they’re not taking on debt in local currency at all. In this situation, I think there would be no influence on the dollar/yuan exchange rate, except for where business needs to be done in the local currency. [My understanding is that this happens a lot down in Mexico too.]

So the speculative conclusion I’m reaching is that the amount of USD debt in play (at this time) that’s really impacting the exchange rate is $84.4B. And since new issuance is increasing at such a high clip, it is actually strengthening the yuan compared to the dollar at this time. And again, that will flip around, once new debt issuance peaks out (and if that ever happens in China, look out below).

It’s occurring to me that this dollar-based financing in China should actually be operating like an S&L bank does. So initially these S&L banks in China need to acquire their dollar “reserves” if you will, by swapping yuan for the dollar, which makes the dollar stronger. And then they simply loan it out at some interest. The initial loan itself doesn’t impact the yuan/dollar exchange rate as long as business can continue to be done in USD. Which presumably is the case, otherwise they would be going to a bank to get a loan in yuan.

But once the money is loaned out, interest payments need to start being made in USD. And that’s where an increase in demand for USD will come from. Per the point I think Michael Hudson was making originally. Sorry for my confusion on this.

China is now a big beast & therefore it is hardly surprising if it takes to throwing it’s weight around & no civilisation I can think of has historically acted any differently, whatever the scale of it’s reach or the ferocity it employs to achieve it’s ends.

We seem to be ok with overt US influence & its middle-east minion but not China (or Russia). At some point we will have to accept that US is no longer the dominant force in the world and Australia will need to work out how to work with China in a close and meaningful way. China is 4x the population of the US with at least the same level of technical sophistication. The US has already lost its top spot.

Maybe it’s because I don’t speak diplomatese, but thought it was a bit of a stretch to see this post’s headline interpretation in the Chinese ambassador’s remarks, or even an implicit threat to Australia’s sovereignty and political system. But I do agree that Australian policy makers should endeavor to develop a more balanced approach WRT dependence on commodity exports to and trade with China. Haven’t looked at recent trade statistics, but I think Australia has historically had significant trade relationships with other southern and eastern Asia countries, as well as Middle Eastern nations.

Maybe it’s because I spend more time with Australian attitudes and politics, living next door and doing much business there, but I read the ambassadors comments as more reflective of how dang racist most Australians are, and how much more overt it has become over the last decade. Not sure the authors take is there at all.
NZ has its share of ‘yellow peril’ fearmongers as well that make it hard to tell what is economic and political and what is social, but aussie is a whole ‘nother level.

Late to the party but I’ll see what I can add. A generation ago I think that most people here in Oz recognized the fact that our future lay with Asia, and I mean all of Asia. We even had a Prime Minister that came right out and said it. Over the years, however, it seems that both main political parties want to drag us back to what is laughingly called the western countries, particularly the US, and to put our country in the position of a vassal state. That gets us doing things that are outright stupid. Just last month, Australia sent three warships – HMAS Anzac, HMAS Toowoomba and HMAS Success – through the disputed South China Sea where the Chinese challenged us. Three ships may not sound like much but that is a big chunk of our naval hardware. You can bet that that bright idea was not thought up in Canberra. We are also helping the US set up a big military base up north because China but more likely to keep an eye on the other Asian countries.
Look, the US is our main security partner while China is our main trading partner. Wanting to have good relations with both is not a having your cake and eating it proposition but what use to be called in the old days diplomacy. Remember that concept? China is different to a lot of countries in how they do things. So what! There are 1.379 billion people living there so it is up to them how they organize their society. We don’t get to tell them how they should live their lives. If they trade with us, it is our option whether to trade with people that behave the way they do but that is it. People have got their knickers in a twist too because they set up those artificial islands but I will give them a benefit of a doubt because the west, until recently, used their coastline for our personal naval parade ground. You can bet that the Chinese Navy remember things like the Amethyst Incident.
We now have a Prime Minister which wants to go head to head with both the Chinese and the Russians. WTF? Just last night I heard him warn the Russian against influencing elections. He said this (irony alert!) as a member of the Five Eyes group. Sorry but there is nothing wrong with having good relations with your major trading partner in spite of what some people think. If some people think that we should go head to head with the Chinese as a matter of principle, then I would invite them to take a dump on the doorstep of their banker – as a matter of principal – and see how far that gets them. Are the Chinese spying in Australia? Only if they are doing their job. Along with the Americans, Russians, Israelis, British and god knows who. Are we spying on them? Damn right we are. But this hysteria, this clutching of pearls, this use of fainting couches has go to stop. Just man up and go after any spies that you can find as I am sure the Chinese are doing with ours in China. Leave it to the professionals.
In reading that David Llewellyn-Smith’s recommendations, I know exactly what he is talking about. Read between the lines and it is a neoliberal agenda like the same that has blighted the Americans. Lower wages, lower standards, lower consumer protections and the whole neoliberal circus. He also want to return Australia to a 21st century version of what was named the “White Australia” policy which dogged Australia for so many decades in the 20th century. Finally, he wants a military front against China which will not make the Chinese paranoid in the least. Sort of like how NATO’s expansion was so great for Russian relations. There are all sorts of ways that we can have relations with China but without turning the country into a neoliberal bastion that would sell us out at the first opportunity anyway. And having our own independent relations I think is vital as nobody respects a vassal state. As Japan.

Japan still has the constitution imposed on it by the US and is a military protectorate of the US.

I worked for the second largest Japanese bank in the 1980s and was the first Westerner hired into the Japanese hierarchy. I was in Japan during and right after the 1987 crash. What was happening in the stock market was bad enough, but the Treasury market started to seize up.

The Fed called the Bank of Japan and told it to buy Treasuries. The BoJ dutifully called the big Japanese banks and they complied.

Tell me where in the world other than in Japan anything like this could have happened.

Didnt something similar happen with the 2008 crisis where all the major central banks of the world were extended dollar lines to support their markets? Ofcourse the US fed would have directed them to do this otherwise bye bye citibank and wall street donations.

If we go by this definition of a vassal state – https://www.merriam-webster.com/dictionary/vassal%20state – then yes I would agree with you on the military front. But on the constitution front, its hard to think that Japan over the years would not have framed developed a higher degree of independence than having a US defined constitution implies.
Can someone expert on Japan please join in?

No, this is the polar opposite. The US was allowing foreign central banks to assist foreign banks since some were sitting on big losses in dollar assets. The US dollar swap lines were the US acting as lender of last resort in the dollar. Citigroup was our problem and the dollar swap lines had nada to do with that.

By contrast, the US in 1987 was leaning on Japan to prop up our Treasury market.

Wait, China is cheating? Do he mean the dumping of steel?
This article sounds very biased. As if the australian government had no agency and was being used by the Chinese government as a puppet. It was Australia’s own doing to be so dependent on China during the commodities export boom and influx of chinese money for real estate.

Whether you like it or not the comment regarding our economic dependency upon mineral and other resource exports to China during the last twenty years or so is true.
Why do Economically and/or militarily dominant powers act like bullies? Because they can. It has always been thus. The US is the previous, and current, example.
A recent ABC ( i.e. Not Murdoch) news story regarding the behaviour of Chinese citizens at a local zoo perhaps serves as a timely warning. Roughly summarised, the locals pelted kangaroos there with rocks to make them hop. One of them died from internal injuries as a result. Zoo authorities plan to stuff the unfortunate animal.
There is a well known correlation between people who abuse animals and their behaviour towards other people – ask any vet.
We should perhaps hope that Jim Rickards is correct and that the Middle Kingdom will economically collapse under the weight of its own debt (270% GDP and rising) before too much “collateral damage” is inflicted upon others.

By telling us only half of the story, what you said sounds like China-bashing. The other half of the story is that such behavior by a few bad apples out of almost 1.4 billion people caused wide-spread outrage and condemnation in China. On the other hand, millions of pets are abandoned in the U.S. every year, and about 25% of these are euthanized. Should we all hope for the collapse of the U.S. economy? Finally, with $27 trillion domestic savings and $4 trillion FX reserve, and a GDP growth rate of 6+%, Chinese economy will not collapse any time soon because of the debt burden.

It was not meant to be the whole story, merely an illustrative example.
Your example of pet abandonment in the US is likewise illuminating – it is probably no coincidence that more people get killed in the US every year as a consequence of domestic gun violence than were killed in the twin towers 9/11 attack.
This led Dubya and Co. To take the US and allies to invade Iraq, directly resulting in the deaths of hundreds of thousands of people , and indirectly resulting in the creation of ISIS and now the devastation of Syria and the death or displacement of the majority of its population.
But have gun laws in the US changed? No. To the vast majority of people living outside the US these lax gun laws are insane .
Does that suffice as another side to the story?
As for predictions of economic doom and gloom, there are also plenty of pundits predicting similar outcomes for both the the US and Europe as well, for similar reasons. Most of said pundits are ,to say the least, somewhat sceptical of official Chinese economic data. It is up to you who you believe. But the exit of over $1.5 trillion ‘flight money’ from China into Sydney, Melbourne, Vancouver and other worldwide real estate would suggest that rich Chinese are not all that confident..

And in a further attempt to tell another side to the story, I am utterly disgusted with our deplorably long standing Australian participation in the live sheep trade with the Middle East, a barbaric process exampled by recent revelations on Australian media.
This trade is an obsequious submission to overblown Middle Eastern “customs” in search of the proverbial quick buck.
Instead, said sheep should be Hallal slaughtered here in Australia and then consigned to Middle Eastern customers as chilled carcasses. If that is not good enough they should, as we say, ” get a job involving sex and travel…..”

You have to make sure the majority don’t vote to redistribute the wealth, which is in their interests.

It has to be controlled to avoid the inevitable result of a pure democracy.

Neoliberalism went too far and made Western democracies ineffective causing the populists to rise (ref. “Democracy in Chains”).

Harold Wilson had problems in the 1960s and they had capital controls in those days.

From Harold Wilson’s memoirs:

“The Governor of the Bank of England became a frequent visitor. . . we had to listen night after night to demands that there should be immediate cuts in Government expenditure.. . Not for the first time, I said we had now reached the situation where a newly elected government with a mandate from the people was being told, nor so much by the Governor of the Bank of England but by international speculators, that the policies on which we had fought the election could not be implemented.”

The more power international capital has; the less power the electorate have. Keynes gave power to national democracy and took it away from international capital. Even then, the demands of international speculators held a strong grip over national democracy.